Should we break up the tech giants? - Macleans.ca

Should we break up the tech giants?

Timothy Wu says Facebook’s huge corporate scale may well make it a threat to democracy

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Facebook founder and CEO Mark Zuckerberg arrives to testify following a break during a Senate Commerce, Science and Transportation Committee and Senate Judiciary Committee joint hearing about Facebook on Capitol Hill in Washington, DC, April 10, 2018. / AFP PHOTO / SAUL LOEB (Photo credit should read SAUL LOEB/AFP/Getty Images)

Should Facebook, Google and other giant tech firms be broken up? If this seems an unrealistic response, even to the problems they’ve been accused of bringing about—from the hobbling of competition to the destabilization of democracy—Tim Wu would like to give you a history lesson. In his latest book, The Curse of Bigness: Antitrust in the New Gilded Age, the Toronto-raised, New York-based lawyer, who coined the term “net neutrality” and has worked with the Federal Trade Commission and at the Obama White House, looks to illuminate the present through the lens of the late 19th century.

The original antitrust movement in the United States sought to entrench competition as an American value, in the face of the monopolies created by tycoons such as John D. Rockefeller and J.P. Morgan. Antitrust legislation helped stimulate the American economy, but the last breakup was AT&T in 1982. Since then, Wu argues, the American judiciary has been convinced—by economists from the Chicago school—that big companies should be dismantled only when doing so would deliver better value to consumers. But how can this even be determined in our tech-focused age, when so many services are offered for free and it’s difficult to predict or even define value?

Wu contends that ever-expanding companies eventually become inefficient, their ubiquity worsens inequality by making it harder for people to find decent work in their field, and their lobbying muscle gives them unwarranted power. He compares the way many tech start-ups now simply hope to be bought out by the likes of Google (itself a part of Alphabet) to the days when robber barons aggressively acquired their competition—the situation may be more convivial now, but it’s still no good for innovation. Wu spoke with Maclean’s from Columbia University, where he teaches law, about the long arms of big tech in the U.S. and Canada, and whether breaking up is always hard to do.

Q: The “tech trusts” you write about, such as Facebook and Google, are multinational. If antitrust legislation were brought against them, could they simply decide to move their headquarters?

A: Those are the empty threats that government has listened to for far too long. The richest country, with the largest economy in the world, is still the United States. I take this idea of capital flight as at best a form of propaganda, at worst an unseemly threat. A smaller country might have more of a challenge, but when you start accepting those kinds of arguments, it’s an erosion of the idea of democracy or popular sovereignty. It says, “Well, we can only do so much; we have to be very careful that we constantly cater to these enormous corporations, or else they’ll leave us.” Who’s really in charge then? The major economic powers should be co-ordinated in their enforcement of the antitrust laws when they think companies are too big. The companies can go to the Canary Islands if they want, but last time I checked, the Canary Islands don’t have that many people to sell to.

Q: Several countries, including Canada, did work together to hold the fake news inquiry in November that Mark Zuckerberg skipped. The Canadian representative, MP Charlie Angus, suggested that Facebook be broken up, and the company’s vice-president of policy solutions, Richard Allan, replied, “Unless you’re going to turn off the internet, I’m not sure people would be better off in doing without Facebook offering the services it’s spent 15 years perfecting how to offer.” What do you make of this?

A: That was a striking exchange. [Angus] took an important angle that sometimes Europeans don’t get their heads around. Europeans are more regulation-focused, and companies like Facebook don’t really fear it. It’s paperwork they have to go through, but it’s not a threat to their way of doing business. Charlie is talking about something structural that Facebook really does fear: being broken into three pieces [Facebook, Instagram and WhatsApp]. Allan’s implication that Facebook is somehow essential is frankly ridiculous. There was an Internet before Facebook; I had friends before Facebook, and it’s not like they’re running the phone networks. Actually, we broke up the phone company in the United States [AT&T, in 1982] and should have broken it up in Canada. [Facebook’s] effort to portray themselves as too big to fail should be ignored.

Q: Consumers are used to the convenience of one-stop searching, shopping and social media—might Allan’s argument about “perfecting” services hold water with them?

A: If Facebook is what perfection looks like, I’d like to live in a different universe. Does perfection mean being open to Russian hacking so that the American elections become questioned by everybody? Loading your feed with so many ads, you can’t tell what’s an ad and what’s not? Allowing companies like Cambridge Analytica to raid your personal information and give it to Republican operatives? Facebook is the poster child of the curse of bigness. There are some companies out there—I think Amazon is the strongest—who can say, “Listen, if you break us up, that isn’t necessarily going to be great for American commerce and the consumer.” I don’t [think] Facebook has anything close to a claim like that. They haven’t invented anything particularly Earth-shaking; the only reason they’re still around is they own their competitors. That company is ripe for a breakup, and it’s not clear that the consequences would be particularly inconvenient for anybody. In fact, it would open the field to better choices. Imagine Wikipedia launches something and says, “This is social networking with no ads, and we don’t let Russians hack our site, and you can still see your friends and family.” Social networks are not rocket science.

Q: And that lock on the market can have impacts in many other spheres—for instance, on the media.

A: They’ve also done a good job of impoverishing the media. Some unconscionable number of people get their news through Facebook, and most thinking people think an independent and strong media is pretty important. So Facebook has very weak arguments on its side.

Q: What do you make of the CBC’s refusal to publish the Nov. 19 interview from Metro Morning with columnist Jesse Hirsh, where Hirsh called Facebook “a threat to democracy” and questioned the CBC’s relationship with the company?

A: I have my suspicions. For 10 years now, Facebook have become expert at throwing their weight around. They rarely do it publicly, but they’re very good behind the scenes at putting pressure on people. It seems pretty clear that Facebook said they were wrongly treated and put pressure on the CBC. I have a lot of friends who have felt similar pressures, and [Facebook have] been very good at getting people to change their tunes. The opinion that Facebook is a threat to democracy, I think, is respectable. It seems to me, knowing what they do, that they said, “That’s an outrageous thing to say,” but journalists are supposed to be allowed to have their opinions. It’s shocking that the CBC backed down. It sort of proves the point about excessive corporate size being a threat to democracy, because if the media is afraid to publish criticisms of powerful private firms, just what kind of place are we living in? It’s not much different than declining to publish criticisms of political figures.

Q: Notably, the CBC is a crown corporation.

A: Crown corporations are supposed to be unconcerned with these kinds of things. It’s notable that the New York Times is not a crown corporation, but they’ve had the backbone to publish numerous scathing exposés. The idea that Facebook is a threat to democracy is legitimate. Whether it’s right or not can be debated, but it’s not like it’s beyond the bounds of journalistic opinion.

Q: You worked with the Federal Trade Commission in the U.S. from 2011 to 2012. How did the time you spent there inform the book?

A: Very profoundly. [That and] my time in the White House [in 2016] are the origins of this book, in different ways. There were some very smart people in that White House, among them the economists, and they were ringing alarm bells on this idea that the American economy had just become overly concentrated. They weren’t antitrust people; they were like scientists who were pointing to a hole in the ozone layer, and that motivated me. In the FTC, we did our best, but I became convinced that the mental framework we were operating under at the agency was incredibly constrictive and had enfeebled law enforcement and made us incapable of doing our statutory duties. The burden of proof we’d created for ourselves was excessive, and there was a tendency towards inaction that ultimately, I think, was unwarranted. At the time, I understood the reasoning for it, but when you look back with a little more perspective, basically we blew it, particularly when it came to mergers. I didn’t work on that many, so I can spread the blame a bit—all of antitrust allowed way too many mergers. Among them, we allowed Facebook and Google to buy too many of their competitors, and the beer industry became consolidated, the fertilizer industry, the airlines…the list goes on and on of industries that got away with too much. One of the reasons I wrote this book, actually, was to give enforcers a little more background and inform them they have a glorious history, which involves some pretty epic challenges. We need to be doing our job. I think in America, and Canada as well, enforcement of laws is important to the preservation of what the countries stand for.

Q: Do you think people have forgotten that part of American history, about the gilded age and the rise of antitrust laws?

A: A glorious history of popular response to the rise of the trusts was the breakup era, and I think it’s forgotten. In some ways, in popular discourse, it’s become radicalized. It was once a mainstream, normal thing to break up companies, and there’s been a 40-year campaign to try to make it sound like some kind of Canadian socialism [laughs]. The way Americans fight political battles is they radicalize things. They declare them out of bounds. That’s why America has a terrible health-care setup—somehow, they radicalize what the rest of the world does. And I’m not saying Canadian health insurance is perfect, but it’s certainly better than what we have in the United States. [Antitrust] should be a mainstream, broadly understood remedy for excessive size—the breakup or preventing many more mergers in the first place. Charlie Angus is on the right path.

Q: To what extent are we dependent on our administrations to be behind this? Could a grassroots movement make a difference?

A: History suggests that when people suffer for long periods of time economically and feel that they have no control over their economic destiny, and there are private powers that seem completely unaccountable, that they become angry and they want something done. That energy can go in some very negative directions; it can become anti-immigrant fever. Sometimes, historically, it led to the rise of dictatorships and fascist governments; it can lead to Communist revolutions if it gets extreme enough. I think a good way to channel it is into an antitrust movement. It’s not like everyone can understand every detail of the antitrust law, but they can understand what something getting too big means and having too many monopolies fees like; they feel the effects in terms of higher prices or a sense that corporations feel no responsibility towards them. So, I think there’s every chance this has become a popular movement that transcends parties. Historically in the United States, it’s been both a Republican and Democratic cause, and often bipartisan. I think it’s something that people are hungry for.

Q: Right now, there’s an antitrust case before the Supreme Court about the Apple Store.

A: I think it’s a symptom of something that’s going on. People are waking up and saying, “Wait, this Internet, which used to be all about competition—something new every day—is basically about three or four firms, and that’s a lot different than the original vision.” There’s a lot less room for hope for entrepreneurs—sort of like, “Well, what’s your next step here?” Retail doesn’t seem too promising, or manufacturing. It’s important that we have channels where people can start small businesses and have some prospect of reaching their customers and not just being copied or cloned or making money for somebody else.